November 30, 2016

Website Visits

Three or four times a week, I'll come across something suggesting that if you just have the right color structure on your website, conversion rates will "skyrocket". This has always been interesting to me - somebody had to #analyze and/or #test the issue in order to demand color adherence, right?

And yet, countless companies listen to the advice and follow the advice and nothing happens to sales/conversion over time.

This is one of the magical aspects of e-commerce ... you can test your way into greatly improved conversion rates and yet sales don't budget.

Why does this happen?

In a recent project, I evaluated the "best" customers in the twelve-month buyer file ... the top 10% of the twelve-month buyer file, measuring website behavior in the next thirty days.

Probability of Visiting the Website 1+ Time in the Next Month = 62%.

Monthly Visits if Customer Visits Next Month = 6.3.

Probability of Customer Purchasing 1+ Time in the Next Month = 50%.

Amount Spent if Customer Purchases Next Month = $140.

You've got eight customers - three of them don't even bother to visit the website next month. But five do visit the website, and if they visit, they visit every five days. Best not to bore these customers to death, #amirite?

Here's where things get interesting. When conversion rate optimization gurus apply their #datascience to conversion, they aren't measuring monthly repurchase rates, are they? No. They demand that the customer visiting the website every five days must BUY SOMETHING EVERY FIVE DAYS. Which doesn't happen, but whatever.

So when we optimize the website via the right color structure or whatever tactic we elect to use, we obviously improve conversion rate. But if we don't increase sales, then what exactly is happening?

This is what is happening.

Probability of Visiting the Website 1+ Time in the Next Month = 62%.

Monthly Visits if Customer Visits Next Month = 5.0.

Probability of Customer Purchasing 1+ Time in the Next Month = 50%.

Amount Spent if Customer Purchases Next Month = $140.

In other words, we reduce the number of visits to the website. By reducing the number of visits, we increase conversion rate without increasing monthly repurchase rates. The net result is no increase in sales but an increase in conversion rate.

See - we're optimizing the wrong thing.

We optimize conversion rate.

We do not optimize monthly repurchase rate.

Sales don't increase as a result.

On a monthly/annual basis, it is very difficult to increase customer spend without significant improvements in merchandise productivity. On a visit-by-visit basis, it is easy to increase conversion rate. But by removing "friction", we optimize for the wrong metric, and do not yield true business gains.

Kevin Hillstrom

Kevin Hillstrom, President, MineThatData

Kevin is President of MineThatData, a consultancy that helps CEOs understand the complex relationship between Customers, Advertising, Products, Brands, and Channels. Kevin supports a diverse set of clients, including internet startups, thirty million dollar catalog merchants, international brands, and billion dollar multichannel retailers. Kevin is frequently quoted in the mainstream media, including the New York Times, Boston Globe, and Forbes Magazine.

Prior to founding MineThatData, Kevin held various roles at leading multichannel brands, including Vice President of Database Marketing at Nordstrom, Director of Circulation at Eddie Bauer, and Manager of Analytical Services at Lands' End.

FAQ For Vendors / Content Providers

1 - I do not accept advertising on this blog.

2 - I do not accept unsolicited content, including interviews, press releases, podcasts, discussions, posts, or other associated content promoting your products, services, or events. This blog is designed to promote my products, services, and content.

3 - As a continuation of (2), I do not accept guest blog posts, regardless of your situation. And I will not link to your blog post or white paper.

4 - I do not exchange links. In fact, I no longer publish reciprocal links to other websites.